Recent trends in digital music have seen major record labels adopting strategies to offer DRM-free digital music downloads to consumers. As of the end of 2007, all four major record labels (Warner Music Group, Universal Music Group, EMI and Sony BMG) were offering their catalogs of music as DRM-free MP3 downloads through Amazon's online MP3 store. However, the purported “sale” of DRM-free MP3 downloads has been structured as a “clickwrap” license to the MP3 rather than a true sale of a single copy of that MP3 (i.e., similar to the licensing structures used in the software industry). As such, terms of use in the licensing agreement offered by Amazon's MP3 store only provide the purchaser the right to copy, store and transfer the purchased MP3 for personal, non-commercial and entertainment use. Due, in part, to the difficulties in monitoring and policing infringing end user behavior of duplicating and proliferating perfect digital copies of a purchased DRM-free MP3 downloads, actions such as redistribution, transmission, assignment, sale, broadcast, renting, sharing, lending, modifying, adapting, editing, sub-licensing are specifically prohibited in such terms.
As of the writing of this application, the legal issue of whether the purported sale of a copy of digital music can be structured as a license of the digital music (i.e., the buyer is a “licensee” rather than an owner and must be bound by any license terms) rather than a true purchase of a copy of such digital music (i.e., the buyer is an “owner” of such copy and is afforded all the legal rights and privileges as an owner) is currently being litigated in UMG Recordings Inc. v. Troy Augusto dba Roast Beast Music Collectables, Case No. 2:07-cv-3106 SJO (AJWx) (C.D. Cal). Nevertheless, to the extent the purchase of DRM-free MP3 downloads is characterized as a true purchase of a copy of such an MP3, the purchaser is afforded rights certain under the “first sale doctrine”, which supports the notion that the owner of a legally-acquired copyrighted work is entitled to give or sell that copy to someone else without getting the copyright holder's permission. However, the Record Rental Amendment of 1984 created an exception to the first sale doctrine forbidding owners of copies of “phonorecords”, for the purposes of direct or indirect commercial advantage, from renting, leasing, or lending, or by any other act or practice in the nature of rental, lease, or lending. In an environment where DRM-MP3 downloads are characterized as a true purchase of a copy, what is needed is an architecture for an online music service that encourages the legitimate reselling and sharing of DRM-free MP3s (afforded under the first sale doctrine and analogous to traditional used book stores and brick and mortar libraries) that does not run afoul of the Record Rental Amendment of 1984 (e.g., any sharing not done for direct or indirect commercial advantage, etc.) and prevents illegitimate and infringing copying and redistribution.